Supermob

by Gus Russo

  David Bazelon successfully weathered the 1952 House Judiciary probe, the protracted five-year investigations by the FBI (which yielded a 561-page report), the LAPD investigations, and a two-decade, if below-the-radar, investigation by reporters Robert Goe and Art White. Bazelon's future accomplishments as a jurist were groundbreaking, transforming the U.S. Court of Appeals (where he mentored clerks such as Alan Dershowitz) into the second most powerful judicial jurisdiction after the Supreme Court. Among his many praised opinions: he extended the rights of the accused and the breadth of the insanity defense to include those with inborn mental defects; in 1973, as head of the nine-judge appellate panel ruling in the Watergate case, he ruled that President Nixon had to hand over the infamous White House tapes; and he ruled that patients confined to public mental institutions were entitled to treatment, as opposed to being merely warehoused.

  In 1962, Bazelon would briefly be considered for a Supreme Court post by the Kennedy administration, which was considering candidates to replace the retiring Judge Felix Frankfurter.58 However, for reasons unknown, the Bazelon nomination was never proffered,"" and another Chicagoan, Arthur J. Goldberg, got the nod. Goldberg was not just another friend of Abe Pritzker's, having been a partner in his law firm, but more interestingly, an investor with Paul Ziffren and Benjamin Cohen in the San Diego Hotel.

  Judge Bazelon (far right) and fellow members of Big Brothers of America meet President Kennedy, April 4, 1961 (Corbis/Bettmann)

  In February 1970, according to the FBI, Bazelon stayed at the mob-frequented La Costa Resort, his bill comped by the hotel. David Bazelon passed away in February 1993, whereupon the D.C.-based Mental Health Law Project changed its name to The Bazelon Center for Mental Health.59

  Meanwhile, undeterred journalists Lester Velie, Robert Goe, and Art White continued the thankless job of poring over real estate records and business filings, stored in clerks' offices and corporate records warehouses around the country. They were energized by the realization that Paul Ziffren was becoming a major political force in California and in the nation. In truth, his ascension was nothing short of meteoric.

  Ziffren's early strength came from his ability to raise money for Democratic candidates. When he solicited funds for Helen Gahagan Douglas in her senatorial campaign against Richard Nixon, Ziffren's methods were mysterious, but few Democrats cared. When a naive young Colorado businessman was recruited by Ziffren to be Douglas's campaign finance chairman, the Coloradan knew something was wrong. "Paul was really the finance chair­man," the businessman candidly admitted to Lester Velie. "I was the front.

  When I tried to determine the sources Paul was tapping, I got nowhere. He wasn't going to let me know the sources." The young man recalled how he could hardly pry Ziffren away from his long-distance phone calls to Chicago. He never learned who was on the other end.60

  In 1953, Ziffren had been elected the Democratic national committeeman for California, a position that saw him hailed for "reinventing" the California Democratic Party, which captured both houses of the state government for the first time in seventy-five years. National Democratic Chairman Paul Butler said, "Paul Ziffren has been the greatest single force and most important individual Democrat in the resurgence of the Democratic Party in California."61 That same year, Bautzer-Korshak pal Pat Brown became attorney general of California, and Lester Ziffren, Paul's brother, became Brown's assistant attorney general for the Southern California Region, where he would serve for seven years.

  If anyone doubted that the Supermob was now untouchable, these developments should have proved dispositive. In fact, the goings-on were still far from public scrutiny. However, the trio of investigators remained undaunted and labored to stop what they perceived as a legitimizing of shady operators and mob-tainted money in California. Often their discoveries were forwarded to the FBI and absorbed into its investigation of the Supermob. The problem for the tireless reporters was getting their work into print. A veteran Chicago newsman who followed Korshak's career recently recalled two instances when he was ordered by a senior editor to remove Korshak's name from unfavorable articles. And articles about Korshak specifically were never even green-lighted. "You couldn't get a story about him in the paper," the Chicago Tribune scribe said. "How many battles do you have to lose before you get the message? There was something special about Korshak."

  With these investigations ongoing, sources kept a steady stream of Kor­shak intelligence flowing into various agencies:

  • In July 1951, an informant reported that Korshak was making an effort to fix the case of an arsonist.

  • Virgil Peterson of the Chicago Crime Commission noted that just after Christmas, 1954, Jake Arvey flew to New Orleans to meet Frank Costello's slot machine and jukebox partner, "Dandy" Phil Kastel, at Kastel's palatial Louisiana estate. In noting "unimpeachable sources," Peterson reported that Arvey's travel arrangements were made by Korshak, who drove Costello to the house.62

  • LAPD intel sources in 1954 reported that, even on the West Coast, Kor­shak was "currently in touch with Capone Syndicate members."

  • Other sources reported that Korshak was "sponsoring" First Ward alderman John D'Arco's Anco Insurance Company, a partnership of D'Arco and Buddy Jacobson (an aide to Korshak mentor Jake Guzik). Anco had been set up as a means for funneling graft money to First Ward secretary Pat Marcy, and from there to the Outfit*

  By 1954, the yeomanlike work of Goe, White, and Velie was gaining more adherents. In addition to the Judiciary Committee's and FBI's plumbing of the Bazelon allegations, the LAPD opened its investigation of the Hayward Hotel.63 The directors of the LAPD intel division also began corresponding with the Chicago Crime Commission regarding the Hotel Hayward ownership. 64 LAPD intel chief James Hamilton also sought Peterson's advice regarding Bazelon, Ziffren, and Warehouse Properties.65 Suddenly, Los Angeles authorities were interested in all things Chicago. LAPD intel chief Hamilton wrote Peterson with a query about Abe Pritzker after he was prompted by an intel division report that noted suspicious movements by Pritzker in Los Angeles:

  Abe Pritzker, a Chicago attorney with offices at 134 N. La Salle Street, which is the same address as that of Sidney Korshak's office, has been closely connected with members of the Capone syndicate, Tony Accardo, and other underworld characters. It is believed by the undersigned that Pritzker may be active locally, as a front for eastern hoodlum money to be invested in the Los Angeles area. Pritzker was at the office of attorney Louis Hiller, 6399 Wilshire Blvd., LA; was there discussing the investment money without the definite plan being indicated. Those present at the meeting included Hiller, Pritzker, and Louis Tom Dragna [L.A. Mafia un­derboss, brother of "the Al Capone of Los Angeles," Jack Dragna]. Hiller indicated that he had a million dollars available for investments.66

  Meanwhile, the business aspirations of the Pritzker legal clan began to explode. In 1957, they created the Hyatt chain of hotels when Jay Pritzker bought a small motel near the Los Angeles airport from Hyatt von Dehn, a real estate developer. Pritzker's intuition was that business executives craved luxury hotels near major airports—and time would prove him correct. The seminal purchase was initiated in a coffee shop named Fat Eddie's outside LAX, where Jay scribbled down his $2.2 million purchase price on a napkin.

  The Pritzkers soon developed a reputation for their canny business modus operandi, being fast to move into a deal and quick to get out if they had to minimize a loss. They also became the avatars of a business technique called asset management, wherein the backer does not directly manage the property and the managers do not directly fund the projects. Since it is so expensive to build hotels and takes three to five years to see profits, the Pritzker family and the management teams of the Hyatt hotels only invest $400,000 to $800,000 per hotel and then get a backer like Prudential Insurance or the Ford Motor Company, companies with "staying power" to foot the several-million-dollar bill to actually build the hotel. Five decades later, the Hyatt chain (with over seventy-four hotels in twenty-seven countr
ies), and other Pritzker holding companies, are worth anywhere between $5 billion and $7 billion, with annual revenues of $1.3 billion. The Pritzkers also became one of the country's largest hospital operators, acquiring six of their own and operating fifteen more under lease and contract management. 67 (See appendix B for more examples of Pritzker business interests.)

  Profits, however, were not the only constants in the Pritzker saga. Rumors flew that, as with their questionable real estate partnerships in the forties, the Pritzkers' new Hyatt endeavor was similarly tainted. One IRS informant who was quoted as saying that "the Pritzker family of Chicago through their Hyatt Corp. initially received their backing from organized crime" was later identified as F. Eugene Poe, the late president of a bank in Perrine, Florida, and vice president of the offshore tax haven where the Pritzkers hid their wealth known as Castle Bank, about which more will be seen.

  Michael Corbitt, who was recruited as a teenager into the operation of Outfit slot boss Pete Altieri, got a glimpse of what lay beyond the Hyatt facade. After he was promoted into the world of mysterious Chicago slot king Hy Larner, who trafficked in drugs, guns, and gambling machines in far-flung locales such as Spain, Japan, Iran, and throughout Central America, Corbitt kept running into the name Hyatt. As he later wrote in his book, Double Deal, "Whenever possible, Hy wanted us to put his guests up at a Hyatt . . . It was common knowledge that most of the Pritzkers' financial backing at that time came from the Teamsters, meaning pension fund manager Allen Dorfman."68 Corbitt, who ran a Chicago security company as his "day job," elaborated about the Hyatt connection shortly before his death in 2004:

  "My first job was the construction of the Hyatt at 151 East Wacker. After the Hyatt was built, I became the security director for the Hyatt chain in Chicago. They were a big Chicago chain—they weren't around the world like the way they are now. I had very close ties to the Pritzker family only through my Outfit connections. Our connections to the Hyatts all over the country were solid. At the time, we were dealing directly with Abe Pritzker. We could get in places that were sold-out; even if they were sold-out, we'd get the presidential suite. I know for a fact that we never got a bill. There is no way Larner wasn't with the Pritzker family."69

  Like James Hamilton, Los Angeles district attorney Thomas C. Lynch wrote to the CCC's Virgil Peterson for information on Paul Ziffren and Jake Arvey.70 That same year, it had been disclosed that Ziffren was the subject of a federal probe into the activities of Enterprise Construction and its subsidiary, United Credit Corp., of which Ziffren was VP and tax attorney. A high government source reported that Enterprise, which had made over $10 million in loans to home buyers, would be charged with misuse of FHA mortgage funds, including kickbacks from loan proceeds, failure to require down payments, exorbitant prices, etc. The source noted that the statute of limitations might inhibit prosecutions for crimes that may have been perpetrated in the late 1940s. Ziffren was reported to have financed United Credit with a fund set up for his wife, Muriel.71 One U.S. senator referred to Enter­prise/ United as "the top racketeering outfit in the fleecing of home owners in the Los Angeles area."72

  When an FHA officer investigating so-called suede-shoe artists visited Enterprise and attempted to warn them that they were on the verge of getting into a legal quagmire, he was quickly advised as to exactly who was calling the shots.

  "I went to United Credit to induce them to be more careful in choosing their contractors," said FHA officer William Murray Jr. "Morrie Siegel, a vice president of Enterprise, tried to impress me by mentioning names of influential people he knew. He intimated he could make things uncomfortable for me. There was a signed picture of President Truman on the wall. I couldn't see to whom it was autographed, but Siegel and the others of the company there kept looking at it, as if to leave me draw the conclusion how important they were."

  If the show-and-tell failed to impress, what happened next certainly did, when Murray was reassigned and demoted. "Later I heard that United Credit was responsible for my being banished to the salt mines of Long Beach [California] because I had gotten in the company's hair," he told a Senate committee investigating FHA fraud.73 Eventually, Enterprise saw its California contracting license revoked and was forced out of business.

  Investigators' interest in Ziffren heightened when they noticed the removal of Ziffren's name from the Warehouse Properties partnership papers in exchange for that of his best friend, David Bazelon, the man who was in charge of selling it for the government eight years earlier (see chapter 5). There is no public record that Ziffren received even one penny for his interest. The new partnership papers state candidly that the purpose of the partnership is "for convenience, in connection with the contemplated sale to the City of Los Angeles."74 The notary on the papers of incorporation was Leo Ziffren, Paul's brother. As previously noted, the Warehouse property sale to the city eventually netted Bazelon a $100,000 windfall.

  As the Supermob prospered, investigators noticed another curious trend under way in 1954: Sidney Korshak and Frank Sinatra, who were by now good friends, began directing their pals to a recently opened bank, guaranteed to be friendly to the Supermob. In no time, studio moguls and A-list celebrities closed accounts in their former institutions and opened them with the City National Bank of Beverly Hills, founded on January 1, 1954, by none other than Al Hart with the intent of servicing the real estate and entertainment industries.75 Initial capitalization for the bank was provided, according to Dunn & Bradstreet, by Chicago's American National Bank, the same institution that provided additional financing for the likes of Arthur Greene and the Hilton chain. According to the IRS, Sidney Korshak held stock in American National, and, completing the circle of insiders, the American National officer who facilitated the capitalization was William J. Friedman, the same man who was Ziffren's partner at Gottlieb, and who became the director of the Rohm Haas enterprise that was seized by David Bazelon's OAP.

  One of Hart's partners in the new venture was Samuel W. Banowit, who was in turn partners with both Alex Greenberg in the Spring-Arcade Building, and with David Bright, associate of Gerry Restituto, the Mafia boss of San Joaquin Valley, with whom he invested in the three-hundred-thousand-acre Bright-Holland Ranch in Lassen County, California.

  A young Francis Albert Sinatra (Library of Congress)

  Hilton's Arnold Kirkeby was also a director of the bank, and Sidney Kor­shak a major stockholder.76 Paul Ziffren's son Ken, himself a future L.A. power attorney, would eventually join the bank's board of directors as well.

  An LAPD memo of August 3, 1958, lists City National Bank among a dozen businesses believed to be fronting for and/or doing business with the mob. Robert Goe's sources stated that the bank had "a number of directors who appear to be nominees or 'front men' for such individuals as Joseph Fusco."77 However, given the extreme laxity of law enforcement in L.A., not to mention Hart's great friends in the attorney general's office, the bank was never adequately investigated, and it would become the largest independent bank in Los Angeles, with $3 billion in capitalization and a total of fifty-four offices throughout California.78

  Like so many other mysterious Chicagoans now doing business in L.A., Al Hart was a mystery to some in law enforcement, but not all. David Nis-sen, former chief of the L.A. division of the U.S. attorney's office, recently said, "Al Hart was a big Democratic fund-raiser. I always thought he was with the mob people, but I never had any actual basis for that."79 Nissen was likely unaware of the FBI's file on Hart, which noted his partnership with Bugsy Siegel, and numerous convictions with the Chicago mob. But others had no doubt about Hart's leanings. "Hart was Korshak's banker and he was the banker for the Democratic Party in California and later the Republican Party—whichever side they decided to support," said veteran Chicago private investigator Jack Clarke recently. "Hart was the major banker and a major player in politics, and he was well-known among the organized crime guys because when they were investigated, they would put money in his bank. They knew he wouldn't allow the IR
S inside the front door of the bank, and he wouldn't turn over his records. Hart and Korshak were really tight. All the friends of Korshak who wanted to protect their money but to still have it close at hand put all their money there."80

  Pulitzer Prize-winning journalist Wendell Rawls, who spent years investigating corruption in the Southern California entertainment community, heard the same thing. "You could deposit any amount in Hart's bank without letting the IRS know," said Rawls. Hart's unusual business practices were well-known in the state attorney general's office in Sacramento. "We had a joke that City National Bank was the closest thing to a Swiss bank in the United States," said the AG's investigator Connie Carlson. "Al would handle any transaction that you needed handled discreetly."81 A 1970 FBI memo summarized, "Cleaning up [mob] money by a bank is an old trick, but an effective one and the City National Bank is as uncooperative [with IRS] as the bank of Las Vegas and a known front for the mob in Los Angeles."82